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Trade, Internal Migration, and Human Capital : Who Gains from India’s IT Boom (English)

How do trade shocks affect welfare and inequality when human capital is endogenous? Using an external information technology demand shock and detailed internal migration data from India, this paper first documents that both information technology employment and engineering enrollment responded to the rise in information technology exports. Information technology employment responded more when nearby regions had a higher share of college-age population. The paper then develops a quantitative spatial equilibrium model featuring two new channels: higher education choice and differential costs of migrating for college and work. The framework is used to quantify the aggregate and distributional effects of the information technology boom and perform counterfactuals. Without endogenous education, the estimated aggregate welfare gain from the export shock would have been about a third as large and regional inequality twice as large. Reducing barriers to mobility for education, such as reducing in-state quotas for students at higher education institutes, would substantially reduce inequality in the gains from the information technology boom across districts.


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    Policy Research Working Paper

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    South Asia,

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    Trade, Internal Migration, and Human Capital : Who Gains from India’s IT Boom?

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    development research group; access to higher education; reason for migration; Primary and Secondary Education; total number of people; cost of living index; cost of migration; Access to Education; idiosyncratic productivity shock; regional inequality; amount of income; higher education institute; sum of import; y2k problem; trade shock; elasticity of substitution; unit of labor; class of model; unit labor; cost of tuition; distribution of population; movement of people; human capital accumulation; types of education; access to job; income from sale; cost of education; impact of trade; total migrant population; barriers to mobility; stock of migrant; distribution of work; expansion of export; labor and education; distribution of welfare; production due; distribution of skill; duration of stay; barrier to education; reduce trade; migration across districts; general equilibrium model; number of migrants; proportion of income; tradeable good; Labor Market; welfare gains; college enrollment; job opportunities; job opportunity; total employment; internal migration; migration costs; aggregate welfare; comparative advantage; migration datum; skill type; trade costs; census data; external demand; utility cost; domestic country; skill acquisition; export shock; International Trade; gravity equation; economic geography; regression results; home district; price index; time t; education decision; trade balance; local access; world demand; market clearing; it services; foreign country; initial distribution; demand shock; commonly known; credit market; residence criteria; Immigration policy; computer problem; excessive speculation; export data; urban sector; trade model; contemporaneous correlation; linguistic diversity; second language; common language; labor mobility; estimation procedure; maximum likelihood; native speaker; computing skill; migration model; it industry; positive correlation; spatial distribution; english speaker; summary statistic; regional employment; trade literature; skill premium; empirical study; competitor nations; employment opportunities; language family; employment opportunity; daily average; small sample; engineering degree; enrollment change; tertiary enrollment; high-tech sector; education level; education data; linear trend; export growth; computer store; computer system; standard error; software industrial; software industry; business application; technological progress; import duty; wage data; satellite link; visa policy; college-educated worker; traded sector; importable goods; internal trade; management cost; world market; rising demand; external trade; labor supply; sectoral employment; constant return; new skill; perfect competition; unequal access; market access; spatial economics; theoretical model; development policy; balance trade; endogenous migration; reducing barriers; high share; information equilibrium; population work; eligible population; population distribution; open access; Education Policy; world income; production function; Research Support; steady-state equilibrium; low-skilled worker; expenditure share; remote region; several reasons; college education; cultural distance; average welfare; high school; open economy; education model; skill group; education market; expected value; employment quotas; reservation policies; home state; take time; private college; mother tongue; spatial dispersion; migration decision; skilled labor; expected utility; unskilled worker; supply side; work mobility; expected return; opportunity cost



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Trade, Internal Migration, and Human Capital : Who Gains from India’s IT Boom (English). Policy Research working paper,no. WPS 9738 Washington, D.C. : World Bank Group.